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Iranian students waves Iran’s national flag during a ceremony marking the 35th anniversary of the 1979 Islamic revolution, at the Azadi (Freedom) square in Tehran, Iran, 11 February 2014. The event mark the 35th anniversary of the Islamic revolution, which came ten days after Ayatollah Ruhollah Khomeini’s return from his exile in Paris to Iran, toppling the monarchy system and forming the Islamic republic. Image Credit: EPA

Tehran: Thirty-five years after the founding of its Islamic republic, Iran is in the midst of a transformative period, with signs that its relations with the United States are warming in a way that was hardly imaginable when Ayatollah Ruhollah Khomeini returned here from exile in February 1979.

On Tuesday, the Islamic state marks its anniversary, as it does every year, with massive public rallies and speeches from top officials. But the speech by President Hassan Rouhani is likely to carry a starkly different tone from the defiant addresses delivered by Mahmoud Ahmadinejad during his eight years as president.

“Regardless of how good or bad Ahmadinejad was, I think the fact that he’s no longer president, in itself, has eased a lot of tension,” Mohammad Marandi, a professor at Tehran University’s Institute for North American and European Studies, said of the former president, who infuriated the West with his controversial and often inflammatory comments.

It’s not that the tough rhetoric has disappeared. Iran’s supreme leader, Ayatollah Ali Khamenei, said in an address on Saturday to Iranian Air Force commanders that the US government was “lying” about not seeking regime change in the country. “If they had the ability” to remove Iran’s top leaders, “they would not hesitate for a second,” Khamenei said.

But Khamenei has approved a less combative approach to the West, especially in negotiations on Iran’s nuclear programme. That is fuelling hope here that Iran can win a lifting of tough international sanctions, the root of its economic woes.

On Sunday, Iran agreed to provide information and explanations to the International Atomic Energy Agency, specifically regarding the development of detonators that are often associated with weapons programmes. The move is seen as a confidence-building measure going into fresh rounds of negotiations that are slated to start later this month in Vienna.

Iran’s shift in international diplomacy has generated the strongest consensus within its political establishment in many years, and follows a prolonged period of bitter infighting during Ahmadinejad’s second term — between his allies who preferred populist policies and those who saw such policies as a threat to clerical rule.

Iran still has other differences with world powers, notably over its support for Syrian President Bashar Al Assad in that country’s civil war. And Rouhani still faces domestic hurdles in implementing his economic policies and his administration’s outreach to world powers. Many Iranians are unconvinced that the theocracy can evolve in ways that will improve their lives.

Domestically, Rouhani’s government is focusing on righting Iran’s wobbly economy, hobbled by high unemployment and by inflation that in January hovered near 40 per cent. The president has not answered calls from many Iranians for expanded civil liberties and social reforms.

On Iran’s nuclear dispute with the West, Rouhani enjoys the support of Khamenei, who has given the president a free hand in negotiations with world powers. Khamenei accepted a more flexible approach when Rouhani entered office, allowing Iran’s nuclear negotiating team to broker an interim deal with world powers that eased some sanctions in exchange for Iran curbing its most controversial uranium enrichment activities.

Iran contends that its nuclear programme is intended solely for peaceful purposes, while the Western leaders worry that Tehran may be developing a weapons capability.

Khamenei called the decision to negotiate, without the resistance that had been a hallmark of Iran’s nuclear strategy during Ahmadinejad’s presidency, an act of “heroic flexibility.”

That phrase was “intended to relay the message that Iran’s top leadership in general, and the leader in particular, should not be viewed as a stumbling block to negotiations and peaceful resolution of the nuclear issue” said Farideh Farhi, a US-based Iran analyst.

Iran is unlikely to abandon its new strategy, experts said, given the Iranian public’s heightened expectations of an easing of sanctions and a corresponding improvement in the economy.

“Tehran is in it for the long haul, because they need the pot of gold at the end of the rainbow,” said Suzanne Maloney, a senior research fellow at Saban Centre for Middle East Policy at the Brookings Institution.

Not since the 1989-97 presidency of Ali Akbar Hashemi Rafsanjani, a close ally of Rouhani’s, has Iran enjoyed the sort of consensus it does right now between religious conservatives and more pragmatic politicians.

One sign that the government is trying to reconcile its internal division came last week when opposition leader Mahdi Karroubi was transferred from a state residence to his own home. Karroubi and Mir Hussain Mousavi were losing candidates in the disputed 2009 election and led the months-long protest movement that followed. Both have been under house arrest since 2011.

“The Islamic Republic is in the most unified state that it has been in over two decades. Right now the extremes in all parties and factions have been largely discredited. The centre in general is stronger and those on the periphery have been weakened,” Marandi said.

Still, while many Iranians seem to approve of Rouhani’s pragmatic approach, his government is not producing the kind of social change that many citizens had hoped to see. Those expecting a return to a more open society, of the type ushered in with the election of Mohammad Khatami in 1997, have been disappointed by the slow progress of domestic change.

Rouhani exerted a lot of effort to court the supporters of the stalled reform movement that preceded Ahmadinejad. But despite early efforts to promote greater personal liberties for Iranian citizens, including promises to reduce Internet censorship and promote a freer environment on university campuses, long-standing restrictions persist.

The number of executions in Iran is still among the highest in the world, the fate of university students who were expelled for political activities during the Ahmadinejad presidency is still undecided, and no discernible progress has been made on reducing Internet censorship.

“Rouhani is first and foremost a pragmatist, and where domestic reforms serve his purposes he will press for them. But this is very different than the kind of philosophical commitment to civil society and rule of law that Khatami demonstrated,” Maloney said.

Domestic issues may become increasingly pressing in the coming months, especially if a final nuclear agreement is reached. For the time being, however, it appears that Iran’s government has calculated that addressing foreign policy issues outweighs implementing liberalising reforms that many Iranians hoped Rouhani would quickly deliver.